Green tech companies grabbing larger share of venture capital

PALO ALTO - Martin Roscheisen, CEO of Nanosolar Inc., holds up a plastic vial filled with dark, purple liquid - the secret ingredient behind a new kind of technology startup that's turning heads in Silicon Valley.

In a private laboratory, Nanosolar scientists are designing low-cost solar electricity cells that Roscheisen submits will make solar power competitive with conventional energy sources.

The purple liquid is a nano-engineered material that "self-assembles" into tiny solar cells that convert sunlight into electricity.

"We're at the threshold of making solar electricity profitable," says Roscheisen, whose firm raised $6.5 million last year from U.S. Venture Partners, Benchmark Capital and other investors. "We're seeing a lot of interest. We're being contacted all the time by investors."

Across the country, venture capitalists are opening their wallets to upstarts that, like Nanosolar, develop "clean" technologies in anticipation of a growing market for products that generate revenue without harming the environment.

In 2003, investment in clean technology ventures rose 8 percent to $1.2 billion while overall venture capital investment fell 14 percent to $18.2 billion, according to the Cleantech Investor Network. The Howell, Mich.-based group defines clean technologies as technologies that allow for more efficient use of natural resources.

Venture capital firms are pouring money into clean technologies related to water purification, agriculture, transportation, manufacturing, recycling, air quality and alternative energy such as solar, wind and hydrogen.

"We're getting a bigger and bigger piece of the pie year after year," said Keith Raab, Cleantech's president and chief executive. He expects more than 300 attendees at the Cleantech Venture Forum in San Francisco April 28-30.

Among the startups that pulled in the most money last year were Evergreen Solar Inc., a Marlboro, Mass.-based developer solar electricity systems that raised $29.5 million, and Powerspan Corp., a New Durham, N.H.-based maker of pollution-control technology for the energy industry that secured $20 million.

Still, some venture capitalists remain wary about investing in environmentally friendly companies after getting burned in the 1980s, when solar and wind energy startups raked in venture dollars, and in the 1990s, when hydrogen fuel cells were hot.

Many urge caution in investing in "clean tech", given that the sector has many unproven technologies, a complex marketplace and a history of poor returns.